SA remains fastest growing region in 2017: ADB

Growth is picking up in two-thirds of economies in developing Asia, supported by higher external demand, rebounding global commodity prices, and domestic reforms, making the region the largest single contributor to global growth at 60%, says a new Asian Development Bank (ADB) report.

According to report, South Asia remains the fastest growing of all subregions, with growth reaching 7% in 2017 and 7.2% in 2018. In India, the subregion’s largest economy, growth is expected to pick up to 7.4% in fiscal year (FY) 2017 and 7.6% in FY2018, following the 7.1% registered last FY. The impact of the demonetization of high-value banknotes is dissipating as the replacement banknotes enter circulation. Stronger consumption and fiscal reforms are also expected to improve business confidence and investment prospects in the country.

In its new Asian Development Outlook (ADO) 2017, ADB forecasts gross domestic product (GDP) growth in Asia and the Pacific to reach 5.7% in 2017 and 2018, a slight deceleration from the 5.8% registered in 2016. ADO is ADB’s flagship annual economic publication.

“Developing Asia continues to drive the global economy even as the region adjusts to a more consumption-driven economy in the People’s Republic of China (PRC) and looming global risks,” said Yasuyuki Sawada, ADB’s Chief Economist. “While uncertain policy changes in advanced economies do pose a risk to the outlook, we feel that most economies are well positioned to weather potential short-term shocks.”

Industrial economies are gathering growth momentum, with the US, euro area, and Japan expected to collectively grow by 1.9% in 2017 and 2018. Rising consumer and business confidence and a declining unemployment rate have fueled US growth, but uncertainty over future economic policies may test confidence. The euro area continues to strengthen, but its outlook is somewhat clouded by uncertainties such as Brexit. Meanwhile, Japan remains dependent on its ability to maintain export growth to continue its expansion.

Overall growth in Southeast Asia is forecast to accelerate further with nearly all economies in the region showing an upward trend. The region will grow 4.8% in 2017 and 5% in 2018, from the 4.7% recorded last year. Commodity producers such as Malaysia, Viet Nam, and Indonesia will be boosted by the recovery of global food and fuel prices.

Regional consumer price inflation is projected to accelerate to 3% in 2017 and 3.2% in 2018 from the 2.5% registered in 2016 on the back of stronger consumer demand and increasingly rising global commodity prices. Inflation projections for the next 2 years, however, are well below the 10-year regional average of 3.9%.

On the domestic front, rising household debt in some Asian economies is a rising risk. Authorities can counter this risk through prudent macroprudential policies, such as requiring tighter debt-to-income ratios for loans. Authorities may also have to intervene more decisively in housing markets to cool speculative demand and head off asset bubbles.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, ADB is celebrating 50 years of development partnership in the region. It is owned by 67 members — 48 from the region.

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